DAX Quiet as German Final CPI Matches Estimate

The DAX is showing little movement in the Wednesday session. Currently, the index is at 12,988.50, up 0.04% on the day. On the release front, there is only one event out of the eurozone. German Final CPI posted a small gain of 0.1%, matching the forecast.

The ECB will hold a critical policy meeting on October 26, but any hopes of a rate hike were dashed on Thursday by Mario Draghi. The ECB President stated that he plans to maintain ultra-low rates “well past” the end of its bond-buying program in December. The ECB has been under pressure to tighten monetary policy, primarily from Germany, where the central bank has called for tighter policy, given the stronger eurozone economy. The ECB is expected to taper its monthly bond purchases of 60 billion euros at the October policy meeting, but Draghi has sent out a clear message that rate hikes will have to wait until 2018. With inflation levels will below the ECB target of around 2 percent, Draghi has been reluctant to raise interest rates until inflation shows clear signs of moving upwards.

Spain’s constitutional crisis continues to rock the country. Earlier in the week, Catalan President Carles Puigdemont declared Catalonia’s independence, but then suspended the move, saying he wants talks with Madrid. However, Spanish Prime Minister Mariano Rajoy is in no mood to chat, and gave Puigdemont eight days to retract his declaration of independence. Otherwise, Rajoy has threatened to suspend the Catalan parliament and impose direct rule from Madrid. The Spanish government has the backing of France, Germany, and other European Union members, and Catalonia itself appears evenly divided on independence. With both sides entrenched in their positions, the crisis is set to continue into next week. The crisis could take a toll on the Spanish economy, as several banks and large corporations have said they will move their legal headquarters out of Catalonia. The EU has refused to mediate, and is treating the issue as a domestic Spanish matter.

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